Rolling The Dice

source: www.wherethewindsblow.com

The article, "First-Generation Player Contracts: An MLB Success Story?"written by Barry Krissoff in 2015, demonstrates the economic principle of following the “rules of the game” and how they influence choices because of guaranteed contracts for the players and the different salaries earned depending on age.

In baseball, players always signed guaranteed contracts, meaning that the player signed must be paid the amount of money agreed upon no matter the circumstances. For example,¨The Braves signed shortstop Andrelton Simmons, first baseman Freddie Freeman, outfielder Jason Heyward, and pitchers Julio Teheran and Craig Kimbrel, all under 26 years old, to multiyear contracts starting in 2014 and totaling a combined $280 million.¨ That $280 million is certain to be lost to those players, which is simply just a ¨rule¨ in baseball. Despite the chances of injury or poor play, teams must be willing to take a risk of losing a boatload of money if they choose to take on a major contract.

Age can be a significant factor for how much money a player is signed for. ¨For the owners, the objective is to retain players who have the potential to contribute significantly to their teams in future years and who would have otherwise become free agents, but limit their future salaries. The owner must weigh the probability of future success of the player. If the owner negotiates a multiyear contract and the player’s performance is stellar, then the owner succeeds. However, if the player does not make the grade and/or is cut from the major league team, then the owner loses.¨ Older players carry some fatigue with them, but also more experience. On the other hand, young players have more active bodies and are most likely in better physical shape, but they don´t understand the game quite as well yet.

In my next blog post, I will research: How do the recent trends and the player´s reputation on and off the field have an impact?